We Libertarians Were Really Wrong About School Vouchers

Twenty years ago, when libertarians looked out over a nation dotted with failing schools, we had hope. We saw what we expected to see: government institutions that were failing in all the ways that governments go wrong. Incentives for quality were low, so the schools were being run for the benefit of the employees rather than the putative customers. And of course the problem was especially prevalent in low-income neighborhoods where parents had little political power and few alternatives.

There is a cure for such problems: the market. Competition and choice could align incentives properly, producing schools that delivered the same kind of quality and service that your local supermarket does.

Of course, it’s uncomfortable to suggest that we should leave something as important as education to the vagaries of the market. Some parents don’t make enough money to pay for adequate education. Some parents could not or would not invest the energy to find a good school. Society has an interest in producing educated citizens with the skills to enter the modern marketplace, and moral decency demands that we make sure every child starts out with a shot in life. So even libertarians quailed at suggesting that we should just shut down all the government schools.

Luckily, economist Milton Friedman had suggested the solution way back in 1955: that we could have a more market-driven education system without entirely abandoning the government’s role. The government should continue to pay for at least some kinds of education, and to oversee minimum quality standards that would prevent unlucky children from falling through the cracks. But schools should have to compete for student dollars.

This was heresy to a nation raised on the ideals of public education. For a long time, the idea went nowhere. But just as I entered adulthood, it finally seemed to take off. Between private efforts like Children’s Hope Scholarships, and public voucher programs, we were finally going to get some choice into the educational marketplace. Like many of my fellow libertarians, I genuinely believed that this would be an economic and social revolution that would, over time, lift millions out of poverty and alleviate all manner of social ills.

Twenty years on, my optimism seems to have been far too exuberant. Some studies suggest that voucher programs do modest good; others suggest that they do very little; and a few suggest that the impacts are actually negative. My overall takeaway from the literature is that voucher programs probably do a little bit of good. But the emphasis is on the word “little”; they are not a cure-all, or even much of a cure for anything. It was reasonable to think, in 1997, that voucher programs could change the world. Now we have two decades of evidence.

How did we get it so wrong? Many explanations have been proffered, starting with “You libertarians were getting high on your own supply.” Maybe markets just aren’t that great.

That explanation would be more convincing if non-market attempts at school reform had gone better. But during the same period, vast sums were poured into liberal projects like smaller class sizes, and the results have been entirely uninspiring. Now the mania is for universal pre-K, not so much because there’s compelling evidence for great outcomes, but because at least we haven’t tried it yet, and therefore don’t know that it won’t work.

Plausible candidates for the lackluster performance of voucher programs are legion: during the same period, charter schools provided public school choice, and perhaps the quality of public schools improved enough to make private vouchers unnecessary; perhaps it takes the market a while to respond to a voucher system by producing excellent schools; and (depressingly) perhaps it doesn’t make much difference what we do in the schools, because most educational effects are driven by a combination of genetics and home environment.

But there’s another possibility, suggested recently in an NBER working paper: Maybe vouchers don’t improve school quality too much because quality is not what parents look for when they’re choosing their children's schools.

At first blush, that seems both condescending and improbable. Are we really saying that poor parents don’t care about the quality of their child’s education?

No, of course not. But the quality of the pedagogy isn’t the only thing that shapes student outcomes in schools. The peer group matters a great deal; families with higher socioeconomic status are better able to navigate the educational system, and they value education very highly, traits they pass on to their children. Those parents also work hard to improve the quality of the schools their children attend.

The socioeconomic status of the students in a school is somewhat easier for parents to observe than the quality of the pedagogy. It’s not then, all that surprising that when researchers sat down to analyze parental decision-making in New York City public school, peer group seemed to be what parents were looking at. And peer group matters a great deal.
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But if it’s not surprising, it is disappointing. The hope of school choice was that the worst-off kids could be given the same opportunities as those born with silver spoons in their mouths. But if what parents are most interested in is keeping their children away from those kids (at least in large numbers), that hope cannot be fulfilled. Improving the quality of instruction can make everyone better off; peer group, on the other hand, is a zero-sum game, where every child who improves their peer group must be counterbalanced by one who is pushed out.

School choice may have other benefits, like encouraging high-income parents to stay in cities, where their incomes bolster the tax base, and provide funds for other sorts of remediation. And of course, it gives parents more options, which is a good thing in and of itself. For these reasons, among others, I still support it. But it no longer gives me the hope it once did.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Despite being a somewhat lazy and disorganized student, I myself managed to get myself into an Ivy League school, not because my teachers were so great (though many were), but because my friends thought that the coolest thing in the world was to get yourself into an Ivy League school. If I’d been surrounded by people who thought that stealing cars and dropping out of high school was the epitome of cool, my life would have turned out very differently.

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”